COVID costs dent Heritage’s bottom line

Heritage Bank has published its financial results for the 2020 financial year (FY20), posting a net profit after tax of $36.2 million, down 16 per cent on the previous corresponding period.

The result was underpinned by after-tax credit provision $7.5 million as of June 2020, in addition to $416,000 in other COVID-related costs.

When excluding COVID-related coasts, Heritage’s net profit after tax was $44.2 million, up 2.3 per cent on FY19.

“That’s a fantastic performance in a very difficult operating environment,” Heritage CEO Peter Lock said.

“Having taken the provision, our fundamental strength means we’re well positioned to handle the ongoing effects that COVID will have on the Australian economy.”

Despite recording a 0.4 per cent decline in loan approvals to $1.8 billion, Heritage’s consolidated assets grew 6.5 per cent to $10.7 billion.

Retail deposits also grew, ending FY20 at $7.9 billion, up 8.8 per cent on FY19.

Heritage’s net interest margin remained steady at 1.89 per cent, while capital adequacy and liquidity ratios both increased.

Over 30-day delinquencies underlying Heritage’s loan portfolio also dropped to 0.4 per cent, below the industry average.

Heritage chairman Kerry Betros also reflected on the bank’s move to expand its branch presence in FY20 outside of its base in Queensland.

Heritage opened its first interstate branch at Castle Hill in Sydney in October 2019, followed by a branch in Parramatta in December. 

“This was a truly historic milestone for Heritage – the first branches outside Queensland in our 145-year history,” Mr Betros said.

“The new branches have been warmly welcomed and have performed well.

“Our long-term plans remain to establish more branches in Western Sydney and in growth regions of Melbourne. However, given the uncertainties of COVID, we’re slowing our rollout plans and will reassess our time frames when the situation becomes clearer.”

Mr Betros added that Heritage would also continue investing in its digital capabilities.

“Serving our members means providing both branch services and online banking channels – it’s not one or the other,” he said.

“COVID has definitely accelerated the shift to digital, forcing a lot of traditional branch customers to do their banking online instead for the first time.

“With people switching to digital more quickly, this will also factor into our thinking on future branch rollouts.”

He added: “We are also investing in our back-office processing systems, with a streamlined loans origination platform expected to go live by the end of this year. This will make the process of applying for a loan with Heritage much simpler and easier, both for customers and our staff.”

[Related: Credit union records resi lending growth]